ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

A+| A| A-

Do Interest Rates Matter for Stock Markets?

This paper asks whether interest rates matter for stock markets in the Indian context. It uses the monthly averages of the sensex and nifty to measure stock prices in April 1996-June 2006. For the same period, the month-end yields on 10-year government security and treasury bills (15-91 days) are used to measure long-term and short-term interest rates, respectively. The paper finds that there is a long-run relationship between interest rates and stock prices. Both long-term and short-term interest rates affect stock prices. The long-term interest rates are found to affect stock prices negatively, whereas short-term interest rates affect stock prices positively. In addition, the sensex is found to be more responsive to changes in interest rates than the nifty.

SPECIAL ARTICLE

Dear Reader,

To continue reading, become a subscriber.

Explore our attractive subscription offers.

Click here

Or

To gain instant access to this article (download).


Pay
INR 236

(Readers in India)


Pay
$ 12

(Readers outside India)

Support Us

Your Support will ensure EPW’s financial viability and sustainability.

The EPW produces independent and public-spirited scholarship and analyses of contemporary affairs every week. EPW is one of the few publications that keep alive the spirit of intellectual inquiry in the Indian media.

Often described as a publication with a “social conscience,” EPW has never shied away from taking strong editorial positions. Our publication is free from political pressure, or commercial interests. Our editorial independence is our pride.

We rely on your support to continue the endeavour of highlighting the challenges faced by the disadvantaged, writings from the margins, and scholarship on the most pertinent issues that concern contemporary Indian society.

Every contribution is valuable for our future.